Speculation rife that Nokia will adopt Windows Phone 7

John Cox |
Feb. 4, 2011

An analyst's open letter to Nokia's CEO, a former Microsoft executive, has triggered intense speculation that the Finnish phone maker will adopt Windows Phone 7 as the firmware for at least some of its struggling smartphone line.

FRAMINGHAM, 4 FEBRUARY 2011 - An analyst's open letter to Nokia's CEO, a former Microsoft executive, has triggered intense speculation that the Finnish phone maker will adopt Windows Phone 7 as the firmware for at least some of its struggling smartphone line.

Nokia's new CEO has planned a Feb. 11 speech to investors, so far without prebriefing analysts or press. Some speculate that event could be used for a major announcement of this type.

Such a software alliance could let Nokia shed some or all of its foundering mobile operating system development. And it could give Microsoft (MSFT) another high-profile handset maker to boost the so-far anemic sales of Windows Phone devices. Speculation and rumor has helped lift Nokia's share price by 4% since Monday, according to The New York Times.

But it would be a high-stakes partnership. Nokia's share of the global cell phone market has been declining steadily. And Microsoft's huge effort to redesign its mobile OS user interface and reclaim a leading role in smartphones has so far met with lackluster sales.

The rumor mill began grinding after Adnaan Ahmad, an analyst with Berenberg Bank in Hamburg, Germany, urged the Nokia chief executive -- and former Microsoft executive -- Stephen Elop and Microsoft CEO Steve Ballmer to form an alliance that would give Nokia full and exclusive access to the Windows Phone "intellectual property."

Fueling the speculation is a planned Feb. 11 speech that Elop will give in London to investors. Elop become Nokia's first non-Finnish CEO in September. On Jan. 27, in comments at a meeting with analysts, Elop said Nokia was willing to "create and/or join other ecosystems" in the mobile phone space, according to the Times story. The comment could indicate that Nokia is considering a partnership with the Windows Phone "ecosystem."

The proposed software alliance would mean scrapping Nokia's MeeGo OS created for its high-end smartphones, an expensive effort with little to show for it. As Ahmad noted, Nokia's smartphone market share in the U.S. has dwindled to the low single-digits.

MeeGo is a joint, open source, Linux-based software project originally launched by Nokia and Intel (INTC), and now overseen by the Linux Foundation. It merges code from two other platform efforts, Intel's Moblin and Nokia's Maemo. The WeTab tablet, which runs MeeGo and is already on sale in Europe, was demonstrated in the U.S. at the recent Consumer Electronics Show.